Japan, Looking for Money, Removes Ban on Casino Gambling

Some forms of gambling are already allowed in Japan, including pachinko, a derivative of pinball. The game has a gambling element that is technically illegal but is universally tolerated in the country.Credit...Issei Kato/Reuters

Lawmakers have cleared the way for blackjack, roulette and other casino games in the country, approving legislation that removes a longstanding prohibition against gambling.

The legislation, passed on Thursday, is a major victory in a longstanding effort to make Japan attractive to gamblers. For years, Japanese businesses and the tax authorities have watched enviously as vast sums have poured into jurisdictions like Macau and Singapore, which have built sparkling casino resorts catering to international gamblers, especially those from China.

Japan is experiencing its own boom in Chinese tourism, and it sees casinos as an added way to cash in. Estimates of the potential size of the industry have ranged as high as $40 billion a year.

International casino operators see a chance to profit, too. The last time Japanese legislators took up the issue, in 2014, Sheldon G. Adelson, the billionaire chief executive of Las Vegas Sands, said his company would be willing to invest as much as $10 billion to develop a casino resort in the country.

“For the investment community, Japan is seen as the crown jewel of Asian gaming development outside of Macau,” said Grant Govertsen, a research analyst at Union Gaming, an investment bank focused on gambling.

The most recent major market in Asia to legalize casinos was Singapore, which approved the introduction of two casino hotels a decade ago. With casino revenue of about $3.5 billion last year, Singapore, a Southeast Asian city-state, ranks as the second-biggest market in Asia behind Macau.

The Japanese market, with its large and affluent local population, could be even bigger.

“It would be shocking if Japan doesn’t become the No. 2 market in Asia on an overnight basis” once big resorts open, Mr. Govertsen said, adding that the exact size of the market is difficult to gauge until regulatory elements, like the number and location of licenses, are known.

Uncertainties remain. The first casinos would take years to license and build, and competition is already stiffening. Newer industry players like South Korea and the Philippines, chasing the same Chinese cash, are building big resorts of their own. China itself is under a cloud, as its breakneck pace of economic growth slows and as the authorities in Beijing seek to tighten control over outflows of money from the country.

The vote came as Japan looks for new sources of economic growth. Tourism is emerging as a newly powerful force in the country, where the economy has traditionally been geared more toward exporting cars and other manufactured goods than importing pleasure-seeking visitors. More than 20 million foreign tourists have made trips to Japan this year, triple the number from a decade ago, many from China’s swelling middle class.

The government of Prime Minister Shinzo Abe hopes the boom will ignite broader economic growth and make up for dwindling competitiveness in other industries — some of which, like consumer electronics, are now dominated by China.

The end of the prohibition on casinos does not mean that anyone could build the next Caesars Palace in Japan. At first, licenses likely will be granted to two or three so-called integrated resorts — which combine casinos with hotels, conference halls and shopping centers — in major cities. Rules governing the bidding and licensing process, as well as the regulation of the casinos themselves, would be detailed in a separate law next year. Actual gambling is unlikely to begin before 2023, several analysts said.

Takashi Kiso, chief executive of the International Casino Institute, a consultancy that has been advising would-be entrants into the Japanese market, said ownership would probably take the form of joint ventures between international gambling groups and Japanese companies. MGM Resorts, Wynn Resorts and other large operators have also expressed interest, in addition to Las Vegas Sands.

“Looking at the debate in Parliament, there’s a lot of resistance to the idea of 100 percent foreign-owned casinos, so that is probably off the table,” Mr. Kiso said.

Some forms of gambling are already legal in Japan. The country allows betting on horse, bicycle and boat racing, and it has a publicly run national lottery. Pachinko, a derivative of pinball played at thousands of noisy parlors around the country, has a gambling element that is technically illegal but is universally tolerated by politicians and law enforcement.

Japan has been debating whether to legalize casinos since at least 1999. A bill similar to the one passed on Thursday made progress in Parliament two years ago but never made it to a vote. Some lawmakers balked at the potential social problems caused by casinos. Among those opposed was Komeito, a Buddhist political party that is a junior partner in the governing coalition.

Multiple opinion surveys have shown that more Japanese voters oppose legalizing casinos than support the idea.

Since 2014, Mr. Abe’s party, the Liberal Democrats, has strengthened its hold on Parliament. It is now less reliant on Komeito and has found a new ally on the casino issue in Nippon Ishin no Kai, a small, right-leaning party with a support base in the western city of Osaka. Nippon Ishin no Kai has been lobbying for one of the first casinos to be built there.